Challenges in the Videogame Category

The fact that the third quarter numbers published earlier this week by NPD Group, GfK Chart-Track Ltd and Enterbrain showed a decline in unit sales of videogame software couldn’t have surprised anyone vaguely familiar with the category. In Japan, unit sales were off 15% from the year-earlier period (which itself was off 20% from the same quarter in 2007). In the UK, unit sales were off 19%, while the U.S. was actually the healthiest geographical sector, off only nine percent.

For the licensing community, the videogame sector is much like others, with property owners trying to hook up with the right publishers who have access to increasingly scarce shelf space. Those publishers are trying to figure out which properties merit the expenditure of scarce development resources, and how to get the titles to market in a way that will let them make a profit. The announcement by Electronic Arts that it plans to chop 17% of its workforce by March as it cuts down the number of games it develops is only the latest indicator of companies coping with a rapidly changing games landscape.

Is there room in the games aisle for B and C titles anymore, or should they migrate directly to more impulse-oriented sections of the store? Can a title tied to a big feature film sell for more than a week or two? Should property owners be looking harder and earlier at mobile platforms and hosts such as Facebook. (And, incidentally, is anyone licensing FarmVille?)

The videogame business has always been tricky to navigate, with its regular platforms shifts. This is a particularly treacherous time, and will require a healthy dose of strategic acumen.